Executive Profile Series with Troy Cullen from Elan Financial Services

by Troy Cullen 0

Troy Cullen is President & General Manager for ATM & Debit Services for Elan Financial Services, and served as panel member for our ATM & Debit conversation on The Exchange. In this role, he manages and is responsible for the overall P&L of the business, leads the day-to-day operations of the organization, and is responsible for leading the strategic direction and investment philosophy needed to grow and thrive.

PJ: How does Elan add value to financial institutions? Does this value proposition differ by the size of FI?

TC: We understand all the compliance and regulatory scrutiny that comes with being a financial institution. Like our FI customers, we have to be PCI and ADA compliant. We meet with federal regulators and examiners on a consistent basis. We have to reach to same level of oversight and scrutiny as our partners, and as such, there’s a level of awareness and expertise of what those issues and what it takes to fulfill them that other processors can’t match.

We spend a lot of time recruiting and developing our people. That’s important for us because we have to understand our customers and deliver solutions that are relevant to their needs. We have a long-tenured staff, especially when you look at our relationship managers who are the point person for dealing with one of our financial institutions. On average, they’ve been here 11 years. A lot of them have been in the industry for 20, 30, 40 years.

PJ: When you talk about the length of time people have been with Elan and in the industry, how much does that help with staying compliant and helping others stay compliant, especially with how things are changing in the industry.

TC: By being bank-owned, and having to deal with and comply with the vast amount of regulation that’s out there, especially now that there is a stepped up and enhanced OCC presence, new oversight from the CFPB, you really can get yourself in trouble if you’re not paying attention to your compliance requirements. And this is a strength for us and really one of the reasons why companies want to do managed services with us. In terms of our relationship managers, I think tenure is important because they understand the history of the business, and they have the depth to understand how those products and services relate to other channels in the bank. That enables our FIs to stick to what’s important to us, and that’s the customer experience, which includes creating new demand deposit accounts, making loans, and building relationships.

PJ: Are there common attributes seen with institutions that use managed services and surcharge-free ATM networks?

TC: Manage services customers realized they can really eliminate a lot of the work and the cost of managing the operations of an ATM program and dealing with the regulatory portion of an ATM program and instead focus on their customers. Banks want high availability of their ATMs. They want a broad set of product and service options and they want to do it economically. FIs really see their role as customer relationship management, especially smaller institutions. When you go back and examine compliance, if you look at the burdens places on FIs the past few years just to maintain their ATM fleets, they’ve been vast. There’s PCI, ADA, things like upgrading to Windows 7, EMV. These are all large, complex, and very expensive projects. And most of the institutions that use us for managed services will leverage our expertise and our know-how in these areas to maintain these fleets and keep them compliant while they service their customers.

We find when we add a managed-services customer, we can add anywhere from 3-to-5 percent in terms of availability. So the average managed services customer that we bring on has ATM availability between 93 and 95 percent. Our overall fleet of managed services on the ATM, we average 98 percent uptime, so that’s a better customer experience for them. Most times, we’re going to cut their costs. And we’re going to keep them out of trouble. We’re going to make sure they’re compliant. We leverage our relationships across vendors such as Diebold and NCR so that we make sure we have the parts in the machines to be ADA compliant.

PJ: With so many customers and members considering ATMs as a primary banking channel, what features can Elan offer at ATMs that are branch-like?

TC: We’re pretty progressive in this area. We’re working with Diebold and NCR [on their video-teller offerings]. We’re currently in pilot with video tellers right now. These devices extend the services of an ATM to include assistance to customers by video and phone so that they can do some advanced transactions such as deposits and cash withdrawals, money orders, and loan applications, just to name a few. By us being able to handle those ATMs and drive them effectively, we extend a set of services the FI can offer in after hours and weekends and that enables them to cut their costs. One of the challenges faced by financial institutions using these video ATMs is how do you staff them 24/7. We have a large call center that is 24/7, so we’re looking into how it’s possible to leverage those call centers so not only can we drive those ATMs and handle the transaction sets that are customers need, we also can be their back office. This extends that philosophy we have, which is allowing our customers to focus on their customers and let us handle all the back-office services.

PJ: Can you ever envision a scenario where the branch completely goes away?

TC: I think there is a lot of branch consolidation going on in the industry. Branches are extremely important for financial institutions because that’s how they extend the relationship. When someone comes in, they have a demand deposit account and they want to do a simple transaction. That’s an opportunity for bank in a face-to-face environment to say, I see that you have a home equity loan with us, would you like to take a look at our home equity rates. You have a debit card with us, do you realize it has a rewards program with it. That’s part of the stickiness financial institutions really want. You can ask if they’re using online banking. It might seem strange that you’re talking about online banking in the branch, but you’re looking for a continuum in services to make it convenient for customers to bank with you. At the branch, that’s super important because most of those value-added services are sold at the branch in a person-to-person environment.

PJ: MoneyPass signed agreements with Wal-Mart and Krogers. What did that mean for the network and which kind of merchants are the best candidates to grow the networks?

TC: MoneyPass is a strategically important asset to us. We partnered with Wal-Mart and Krogers to help extend the visibility of the brand as well as enabling the network to reach thousands of consumers in those locations they frequent regularly. MoneyPass is all about convenience. Anything we can do to add on to that convenience and make it visible and easy for the customer to use is what we’re going to do. In the end, we’re going to offer convenient locations for cardholders. At the same time, for merchants, we want to be able to direct our 60 million cardholders into their stores. Partnering with highly visible natural merchants makes sense for the cardholders but also the merchants because they want access to those cardholders to come into their stores.

PJ: Surcharge-free networks have become a crucial element of many prepaid programs. How does MoneyPass view itself in the area?

TC: It’s a balancing act. You have to take issuers’ and acquirers’ needs into consideration. That’s how you run a surcharge-free network. Today we partner with the majority of prepaid issuers and processors and we see our network as a cost-effective way for those partners to enable their customers with access to cash. It also can’t be understated, but for prepaid providers it ensures they are in compliance. In turn, our acquirers see transactions they normally wouldn’t see. That’s additional interchange for them and it’s a win on both side of the transaction.

PJ: As a debit processor, how has the Durbin Amendment affected business since it was enacted?

TC: I guess that depends on who you are. The merchants certainly liked it. From an issuers standpoint, we’ve seen an increase in signature-debit use. And we’ve also seen a decrease in the revenue earned for issuers due to the cap. If you look at our Visa debit card issuers, these impacts have not only been limited to financial institutions over $10 billion [in assets], but really all Visa issuers regardless of their size have been impacted. Visa had implemented its PIN Authenticated Visa Debit (PAVD), and other merchant incentive programs, and that’s resulted in a decrease in Visa issuer interchange earned, especially compared with MasterCard. And so that creates some changes in the marketplace. It’s almost like a game of checkers: one side moves forward and another side moves forward. In the end, there are a lot of dollars at stake for the issuers and the merchants. I think our issuers are most interested in valueds services and access for their customers and how they can do that inexpensively and maximize their profits. It’s a daily changing thing. The only other impact we had was, because of Durbin and because of the mandates about networks on the card, we rolled out MoneyPass point of sale. Since May, our customers had the MoneyPass bug on their cards. We expanded the network to enable point-of-sale transactions and as a result our customers saved a lot of money and time by leveraging that network as their second PIN alternative

PJ: Elan recently released a tool to help combat fraud at the ATM and point of sale. How is this tool different from how Elan dealt with fraud in the past and how will EMV implementation in the U.S. change how the company deals with fraud going forward?

TC: Fraud always has to be top of mind for us because it is a big part of the cost of being in business as an issuer and acquirer. It’s an area we’re always looking to expand and strengthen. We’ve done things like supply clients with a very easy interface to implement their own real-time [fraud] rules so that they can manage the fraud based on their particular geography, customer base, and other needs. That’s called eTranBlock. These rules take advantage of all types of transaction parameters and then take advantage of our fraud scoring so clients no longer need to reach out to us or fraud specialists. They can create their own rules in a real-time way to mitigate risk. When it comes to fraud, time is money. To be able to put things in place quickly after an issue with fraud can really save a significant amount of money and prevent broad fraud. At the same time, they can still contact our fraud specialists 24/7.

On the flip side, there’s EMV. I think everyone in the U.S. hopes EMV will have a lot of positive impacts. I think that the jury’s still out on how effective EMV will be because in some ways, the technology has leapfrogged. It will certainly help combat fraud from compromised cards and skimming, but as every region around the world has seen, when EMV is rolled out, fraudsters change behavior. There’s also a lot of concern that for some years now that if the U.S. didn’t adopt these standards, that fraud will just come to our shores. That may be partially true. [EMV] is a large undertaking and a very costly one. We’re helping our customers to understand it because a lot of them don’t know where to start when it comes to EMV. And that does come back to the compliance discussion we had earlier. We’re just educating them on what needs to be done and that’s a big part of our job.

PJ: What kind of gains has Elan made in terms of its Vault Cash Services and where do you see things going forward in this particular area?

TC: As a large financial institution, providing cash is what we’re all about. We’ve seen very high growth rates over the last several years, particularly as you had the financial crisis and by some accounts you have the aftermath of that crisis continuing. During that period, you say a lot of financial institutions pull back, and some even pull out, of the cash providing business. If you look back over the past seven years, we’ve tripled the size of our cash business and provide close to $1 billion in cash to third parties. There have been a lot of predictions about decline cash levels, particularly with the pervasiveness of prepaid cards and benefits access. I think one of the keys to our success, and of our strengths, is really our ability to provide cash at a very competitive rate and because we have arguably the healthiest large bank in the country at our coure in U.S. Bank. We also have the ability to accurately model the cash demand at ATMs. This way our customers benefit from having less cash at the ATM. As interests rate rise (I know we’ve been talking about that for years, and they are going to) it’s going to be more important for us to streamline the process of fulfilling cash orders and providing a better user experience. We’re in the process of enhancing web-ordering system and interface so it lowers the time for people to order cash. It sounds really easy, but forecasting cash levels at the ATM actually involves a lot of science to do it well. One of the things I’ve noticed is when we have new cash receiving customers, many of them marvel at our ability to assess their cash needs. That drives down their need to borrow cash. It helps us to a better job of preventing their ATMs from running out of cash.

PJ: Where do you see the industry heading over the next few years, and how will Elan and MoneyPass respond to these challenges?

TC: We’ve seen more change in the last five years than we had in the prior 15 years. Durbin had an impact; compliance requirements also have an impact. Now with the explosion of mobile, you’re starting to see some changes in consumer behavior. We’re working with a lot of our customers in channel convergence in mobile. We hope to extend the MoneyPass Network into the mobile space later this year. Also regarding mobile, there continues to be no clear leader in the space. There are so many options across mobile payments, and even mobile banking. We’re moving towards making MoneyPass a hub for mobile financial services such as payments, remote deposit capture, coupon offers, rewards, fraud alerts, bill payments, and e-receipts in conjunction with ATM use. We want to make MoneyPass a center for cardholders to do all their mobile transactions. In the end, I think our role is to survey the upcoming trends and provide assistance for our customers in the implementation of those trends. In some places you want to be a leader, but in most places you want to be a fast follower.

Learn more about Elan Financial Services.

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